Role of savings empirical

Role of savings empirical

Solow’s surprise: more than savings

This model most often attributed to Robert Solow (1956) – US Nobel prize winner …. but Trevor Swan (1956) (a less well known Australian economist) published (independently) a very similar paper in the same year – hence refer to Solow-Swan model

Summary of Solow-Swan

Solow-Swan, or neoclassical, growth model, implies countries converge to steady state GDP per worker (if no growth in technology)

if countries have same steady states, poorer countries grow faster and ‘converge’

call this classical convergence or ‘convergence to steady state in Solow model’

changes in savings ratio causes “level effect”, but no long run growth effect